Slow growth, high expectations leave Latin America in a funk

By Jorge G. Castaneda / MEXICO CITY

The conventional wisdom in Latin America is that the combination of economic growth, representative democracy and middle-class expansion has led the region into a trap, with citizens’ expectations rising faster than governments’ ability to fulfill them. The frustrated middle classes, together with traditional sectors, stage demonstrations and riots and vote out unresponsive governments. Yet few expected this tide of frustration to threaten Latin America’s most competent national leader, Colombian President Juan Manuel Santos, or one of its most revered traditions, Brazilian soccer.

Santos has governed Colombia boldly and effectively for four years. He not only ratified a free-trade agreement with the US and addressed previous governments’ human rights violations; he also stuck to his guns on important reforms, despite large-scale protests by students, teachers, peasants and business owners last year. While the economy has not grown fast enough to meet the country’s needs, it has performed better than many others in the region.

Most important, Santos staked his political capital on negotiating peace and disarmament with the Revolutionary Armed Forces of Colombia (FARC) — the powerful guerrilla group (often characterized as a “narco-guerrilla” movement) that has been wreaking havoc on the country for four decades. While some progress had been made since peace talks began in Cuba three years ago, the negotiations were moving along slowly, giving opponents like Alvaro Uribe, Santos’ predecessor, ample time to mobilize public opinion against the talks.

Taking advantage of widespread opposition to amnesty for FARC leaders — a concession that would be an essential component of any deal — Santos’ rivals transformed the first round of the election into a referendum on the negotiations. Santos lost by nearly 5 percentage points.

Colombians were in a funk, and they took it out on Santos. He recovered by the second round, but won by a much smaller margin than anyone expected six months ago.

Brazilians are in a funk, too, and they are directing their ire against the ruling Workers’ Party, with the ongoing World Cup soccer tournament and plans for the 2016 Olympics serving as prominent symbols of its leadership. Following the start of the World Cup earlier this month, Brazilian President Dilma Rousseff, who is to run for re-election in October, began to slide in the polls.

The Workers’ Party presidents — first Luiz Inacio Lula da Silva, then Rousseff — believed that holding the world’s two most important sporting events within a two-year period would mark Brazil’s emergence as a rising world power, serving as a kind of “coming out party.” And their logic was sound, if a little arrogant; only two other countries — Mexico and Germany — can count a back-to-back World Cup and Olympic Games among their achievements.

Brazil’s rise was not as secure as its leaders seemed to believe. In 2011, the economy stalled, and output has been stagnating ever since. The growth of the lower middle class — which had swelled by tens of millions of people in the preceding years — was halted, and consumer debt exploded.

Even soaring commodity prices, bolstered by strong demand from China, became problematic, with the expectation of a terms-of-trade reversal generating significant uncertainty. Indeed, as GDP growth in China and India has slowed, so have those countries’ purchases of Brazilian primary goods.